Sims Finances Start-Up Rental Community near The Villages
“The team at Sims delivered exactly what we needed. At a time when the market was in turmoil, their calm, steady approach crafted a financing package that will allow us to expand our mission, diversify our services and provide care and comfort for a new generation of older adults.”
– Robert Dahl, President & Chief Executive Officer, Elim Care, Inc.
Trinity Springs is a new assisted living and memory care community that will be located on 20 acres in Wildwood, Florida. The community is owned by Elim Senior Housing, Inc. (“Elim”), an affiliate of Elim Care, Inc. Elim Care, Inc. is a Minnesota 501(c)(3) headquartered in Eden Prairie, Minnesota with the purpose of providing housing, health care and support services to older adults and to advance the mission of “Service in the spirit of Christ’s love”. It is the sole corporate member of 21 support organizations located in Minnesota, North Dakota, Iowa and now Florida.
Upon completion, Trinity Springs will consist of 107 assisted living apartments, 48 memory care assisted living units with 54 beds and 2 guest suites. The Project is located in Wildwood, Florida and is immediately adjacent to The Villages. The Villages, located just east of the site, is a 55+ age-restricted, master planned community that offers recreational amenities such as golf courses, recreation centers, three town squares, parks and a polo stadium and had an approximate population of 157,000 in 2016. The Project is located next to a new sanctuary for the Live Oaks Community Church. Both the Live Oaks Community Church and Elim are affiliated with the Evangelical Free Church of America.
Sims was selected by Elim as its financing partner to help with its first start-up project in the Florida market. Elim recognized that Sims’ experience with local authorities and regulations and financing team members’ local knowledge and long-time experience with both start-up and rental projects in the Florida market would benefit the financing.
As is common with start-up projects, Trinity Springs was constrained in its total borrowing capacity based on anticipated future cash flows. HJ Sims worked with Elim to evaluate long-term financing options such as tax-exempt, long-term fixed rate bonds as well as a traditional bank loan. It was determined that even though a traditional bank loan would offer a slightly lower interest rate, it would not be the best option for financing due to loan-to-value constraints. Tax-exempt, long-term fixed rate bonds would allow Elim to lock in a low fixed rate for 35 years without regard to loan-to-value constraints or future refinancing risks.
Following the outcome of the Presidential Election, interest rates rose dramatically, and Sims worked tirelessly with Elim to strengthen project cash flows including scaling back the project to remove the planned independent living units. This new unit structure helped to strengthen cash flow projections in the early years of operations and bolstered the projected debt service coverage and days cash-on-hand ratios. Furthermore, to provide additional credit support desired by the market, Elim Care, Inc. entered into an unfunded liquidity support agreement for the project. Sims designed a tax-exempt bond structure with four maturities ranging from ten to thirty-five years to best take advantage of investor desires and market conditions.
On August 29 2017, Sims closed on the $53,050,000 tax-exempt bonds issued through the Capital Trust Agency. Approximately $8 million of the Series 2017 bonds were purchased by 17 institutions with strong individual investor participation through Sims’ retail investor network. The final financing structure had four maturities with a final maturity in 35 years. Additionally, Elim contributed $1,225,000 in equity. The overall arbitrage yield on the entire issue was 5.78%.
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